Multi-year Expert Meeting on Enhancing the Enabling Economic Environment
at All Levels in Support of Inclusive and Sustainable Development (2nd session)
Towards an enabling multilateral trading system for inclusive and sustainable development
Geneva, 8 – 9 December 2014
BACKGROUND NOTE BY THE SECRETARIAT
Mina MASHAYEKHI
Head
Trade Negotiations and Commercial Diplomacy Branch
DITC/UNCTAD
Multi‐Year Expert Meeting
Towards an enabling multilateral trading system for inclusive and sustainable development
Background note by the secretariat
8-9 December 2014
Mina Mashayekhi
Head
Trade Negotiations & Commercial Diplomacy Branch
DITC/UNCTAD
Outline of the Document
(TD/BC.I/MEM.5/5)
Introduction
1. Changing landscape of trade and development
2. Multilateral trade negotiations
3. Evolving regional trade agreements
4. The way forward: Towards an enabling multilateral
trading system
Conclusion
2
Context
• The international community is set to define the post2015 Sustainable Development Goals (SDG)
– e.g., End poverty; end hunger & achieve food security; ensure
access to energy; promote inclusive & sustainable growth;
sustainable industrialization; reduce inequality; address climate
change
– Trade is expected to play a key catalytic role by promoting
broad-based economic growth, structural transformation, job
creation, and acting as an enabler for other substantive goals
• Positive national policies, as well as an enabling
economic environment, will be central in harnessing the
potential of trade for inclusive and sustainable
development
• An open, transparent, inclusive, non-discriminatory and
rules based Multilateral Trading System (MTS) remains
an integral part of an enabling economic environment
and a global public good to be supported and upheld
3
Context (cont’d)
• The international trading system needs careful review to
deal with development priorities in a context of
fragmented production, multipolarization, and
regionalization
• Trade provides means to overcome constraints posed by
small domestic markets, allowing access to larger
external markets, skills, technology and capital, which
enable a better use of productive resources and catalyse
structural transformation
• Over the past decades, it underwent a multitude of
transformative shifts in its size, structure and patterns,
creating opportunities and challenges for a new growth
path towards the new post-2015 development agenda
4
Changing Trade Landscape
• The volume of world trade in goods and services
increased fivefold from 1990 to 2013
• Since 2002, trade has steadily grown faster than
GDP annually, except in 2009
• The increase in trade was accompanied by rising
real GDP per capita
• Per capita income
grew faster during
last decade than in
previous decades in
most developing
regions
5
Participation of Developing Countries
• The share of developing countries in world merchandise exports has climbed
from 24 % in 1990 to 45 % in 2013
• There is substantial variation in trade performance across countries, which
has given rise to a multipolar world economy
• Trade participation is heavily skewed: the 20 largest exporters, mainly from
developed and Asian regions, represent 70 % of world exports
Share of developing countries in world goods exports 2000 and 2013
• Btw 2000-2012, 75
developing countries an
average export growth of
10 % p.a. BUT 60 of
them registered
persistent current
account deficits
80%
60%
40%
20%
0%
-20%
Developed Transition Developing Developing Developing Developing
Least
economies economies economies
Africa
America
Asia
developed
countries
2000
6
Change 2000-2013
Price Evolution of Traded Goods
• Rising commodity prices have underpinnned the growth in the nominal
value of world trade and improved terms of trade for commodity
exporters
• Many LDCs & sub-saharan Africa remain essentially marginalized:
undiversified commodity exportes are vulnerable to price reversals and
short-term volatility
• High commodity prices have accentuated traditional specialization
patterns and discouraged diversification (de-industrialization)
300
200
100
Manufactures
Fuels (HWWI)
Primary commodities excluding fuels (HWWI)
7
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
0
1995
• Food price hikes in 2007-2008
hightened food-security concerns
• In 2012, only 4 of the total 13
developing country regions had a
positive trade balance in basic
food
Trade within Global Value Chains
• World trade expansion has been marked by technical advances, falling trade
costs, an open trading environment and the rise of GVCs
• Since late 1990s, the expansion of trade has been driven by the expansion of
trade within GVCs in the production of goods such as electronics and
automotive products
Change in share of product categories in developing country manufacturing exports by technology intensity
• GVC trade is intra-industry and intraregional mostly
• GVC trade has been accompanied by
the increased technology-intensity of
developing countries’ manufacturing
exports
50%
25%
0%
ResourceLow technologyintensive
intensive
manufactures
manufactures
Medium
High technologytechnologyintensive
intensive
manufactures
manufactures
-25%
1995
8
Change 1995-2013
GVCs and Development
•
•
•
•
9
GVC trade entails greater trade in intermediate goods to deliver
the final product (55% of world trade in 2012)
Trade in GVCs has allowed countries to specialize in specific
tasks performed in a certain production segment (“vertical
specialization”), opening opportunities for fast-track
industrialization at a lower cost
However, the result has been “thin industrialization” in many
cases as countries specialized in low-skill labour intensive
activities without the ability to upgrade
The degree of value added varies across value chain; in
particular services like R&D, product design, marketing, etc. often
add more value than assembling for instance
GVCs and South-South Trade
• Dynamic growth in South-South trade, particularly intraregional trade, is in
large part a reflection of growing GVC trade
• South-South trade represents ¼ of world exports and outpaced global
exports in all developing regions between 2000 and 2012
• Asia accounts for 84 % of
global South-South trade, half
of its export are intraregional
and this trade tends to be more
technologically intensive than
other exports
• Asia has emerged as a major
production platform to supply
consumer markets, mainly in
developed countries
80%
70%
60%
50%
40%
1995
1997
1999
2001
Intraregional
10
2003
2005
South-South
2007
2009
Global
2011
Increased Importance of Services
•
•
11
The services economy and trade has been instrumental for
sustained world trade growth as the sector helps improve
efficiency and competitiveness in other sectors
Services are inputs to merchandise, including agriculture
Developing Countries in Services Trade
• In 2012, services represented 14% of total exports of goods and services
of developing countries, their share increased particularly in construction
and computer and information services
• Exports in business and ICT services outpaced those of other services.
180
140
100
60
2008
12
2009
2010
2011
2012
2013
Transport
Travel
Communications
Construction
Insurance
Financial services
Computer and information
Royalties and licence fees
Other business services
Personal, cultural and recreational services
Service Value Added in Gross Exports
• Services activity are pivotal for GVC trade, as many services are
incorporated in the gross value of exported goods as inputs and
often capture a substantial proportion of value added
• 45% of world goods export value in 2009
60%
40%
20%
0%
-20%
1995
13
Change 1995-2009
Services
• Services trade increasingly occurs through FDI
– Over 70% of world FDI outflows ($1.5 trillion in 2010-2012) were in
services activities
– UNCTAD estimates the value of all sales by affiliates at $35 trillion
in 2013, and if half of this is assumed to be in services, trade
through foreign affiliates could be in the order of $17 trillion, 3 times
greater than global cross-border services exports
– Developing countries’ share in global FDI outflows increased from
0.4% in 1990-1992 to 10% in 2010-2012
• Services trade may also occur through the crossborder movement of people supplying services
(Mode 4, professional and business services)
– This trade appears to be on a rising trend inferring from a continued
growth in global remittances flows ($542 billion in 2013, of which
$404 billion received by developing countries)
• Financial inclusion is important for inclusive
development & poverty alleviation
14
Real GDP and Exports Performance
•
•
•
Current trade growth rate below the 2000-2013 average reflecting
a near stagnation of the world demand
This pace of growth is among the weakest since 2002
Declining elasticity of GDP to trade reflects structural changes or
a cyclical development?
20
Average global
export volume
growth 2000-2013
10
Average real GDP
growth 2000-2013
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-10
Real GDP
15
Global export volume
Policy Issues for Inclusive & Sustainable
Development
Many countries face challenges in making economic growth
inclusive and sustainable:
• Global unemployment rate remains around 6%, with some 200
million people unemployed (30 million more than pre-crisis level,
affecting particularly youth and long-term rates)
• Informal employment remains at 40-50% in developing countries;
• Global income inequality has risen. The share of world labour
income in GDP fell from 60 in 1980 to 54% in 2011
• Poverty rations are still above 45% in low-income countries
Transmission of efficiency gains from trade to broad-based
development is not automatic:
• Conscious policy efforts at macro and sectoral level are required,
including coherent and integrated policies for diversification,
structural transformation, technological upgrading and job creation;
• An enabling economic environment is important in underpinning
16 such policy efforts.
Multilateral Trade Negotiations
•
•
•
Doha Round was launched in 2001 under a single undertaking while
giving priority to implementation difficulties and SDT
Recurrent setbacks and growing prevalence of alternative
negotiating fora affected the negotiating process
MC9 adopted a set of decisions (Bali Package):
– Agreement on Trade Facilitation (TFA);
– Agriculture (food security, TRQ, export competition, and cotton);
– Development-related issues (DFQF, preferential rules of origin,
operationalization of the LDC waiver, SDT monitoring mechanism)
•
The recent General Council Decisions (27 November) unblocked
the stalemate following the failure to adopt a legal protocol for TFA
in July 2014
– Adopted a legal protocol for TFA
– Clarified the Bali decision on food security (peace clause in place until
“a permanent solution is agreed and adopted” Efforts to agree & adopt
by December 2015)
– Post-Bali Work Programme is now to be developed by July 2015
17
Trade Facilitation
• The TFA is the first binding multilateral agreement
negotiated since the Uruguay Round (addressing some 40
customs procedures)
• Contains an unprecedented form of SDT for developing
countries establishing a link between their implementation
capacity, provision of capacity-building support and the
timing and level of commitments
– To address the concern over implementation costs
– The Trade Facilitation Facility is being set up
• The early harvest nature of TFA raised concern over its
effect on a single undertaking and the linkage wirth other
negotiating areas (eg, food security issue)
• The WTO General Council adopted on 27 November a
Protocol amending the WTO Agreement to insert TFA
18
Agriculture
• High food prices had led many countries to introduce public
stockholding programmes for food security purposes
– Procurement of wheat and rice at subsidized administered
prices from low-income and resouce-poor farmers
• The original proposals sought to introduce some reform of
AoA, incluidng by exempting relevant price support from
the scope of the AMS
• At Bali, in the absence of permanent solution, an interim
peace clause was adopted & a permanent solution was to
be negotiated by 2017
• The 27 November General Council Decision:
– Peace clause will be in place until a permanent solution is
agreed and adopted, including after 2017
– All concerted efforts will be made to adopt a permanent
solution by 31 December 2015
– Negotiations will be held in CoA SS in dedicated sessions
19
Development Issues
• DFQF market access is an agreed international
development target contained in the MDG 8 and in the
Istanbul Programme of Action
• The Bali outcome urged, but did not require, an
expeditious improvement of DFQF coverage by 2015
for those countries that had not provided such
treatment for 97 % of tariff lines
• Regarding preferential rules of origin, non-biding
guidelines for making rules of origin simpler and more
transparent
• LDC group submitted a collective request regarding
the operationalization of services waivers in July 2014
identifying sectors & modes of their export interest
20
The Way Forward (1)
• The difficulties of WTO Members in implementing the TFA
has created new uncertainties over the prospects for the
post-Bali work on the Doha Round
• Some key principles of the post-Bali Work Programme:
– Balanced approach to agriculture, non-agricultural market
access and services
– Centrality of the development dimension
– Need to focus on “doables”
• Views differ on differing negotiating approaches, whether to
use the 2008 draft modality texts on agriculture and NAMA
as the basis for future work
• However the current trade environment differs from the one
of 2008 (e.g., Commodity prices, the level & users of
domestic support)
21
The Way Forward (2)
• The relative incidence of NTMs (sanitary and phytosanitary,
technical standards) on developing countries export has
increased (incidence is about twice as great as that of
tariffs)
• Post-Bali work programme is likely to be influenced by
parallel plurilateral and regional processes:
– Environmental goods: July 2014: 14 countries representing 86
% of the global environmental goods trade launched
plurilateral negotiations for an environmental goods
agreement
– TISA: 23 WTO Members and representing 70 % of global
services trade
– Information Technology Agreement: negotiations on
expanding product and country coverage
22
Evolving Regional Trade Agreements
• Can be the most significant challenge to the MTS
• As of June 2014, some 585 notifications were made to
WTO, 379 were into force
• 21st century RTAs are characterized by a range of behind
the border regulatory measures, including investment,
competition policy, capital movement, intellectual property
rights and government procurement
• Mega RTAs has brought a quantum leap in the recent trend
towards trade agreements, over which many developing
countries have no control
• South-South RTAs deepened & expanded, including
towards “developmental regionalism” (eg, CFTA)
• Need for an optimal mix of multilateral and regional
processes, with a strong multilateral oversight
23
Comparison of mega-RTAs
24
Mega RTAs
• By inducing deeper liberalization and high-standard
regulatory harmonization covering an increasing share of
world trade, MRTA could further affect incentive for
multilateralism
• It is often argued that mega RTA would create a new
template for future trade and investment cooperation
• From a development perspective, MRTA and the 21
century RTA more generally might represent a risk for
weaker and more vulnerable developing countries
• RTA may limit countries’ policy space to implement
proactive trade and industrial policies for development
purposes
– State-owned enterprises
– Invester-State disputes
– Regulatory coherence & harmonization
25e
Towards an enabling MTS (1)
Legitimacy of the MTS as a global public good:
• Transparency & monitoring of trade protectionism
– G-20 members put in place 93 new trade-restrictive measures during the
period from mid-May 2014 to mid-October 2014 (eg, trade remedities)
– 962 of a total of 1244 trade restrictive measures since the global crisis (= $
757billion, or 4.1% of world imports)
•
•
•
Continues to head towards universality attracting new members
(accession)
WTO’s DSM continues to be used
Careful reflection is needed on how the negotiating function of the
MTS can be strengthened, in the presence of parallel plurilateral
and regional negotiating processes
– Negotiating efficiency & equity
– the appropriate level of contributions from developed and developing
countries (architecture for SDT)
•
26
Challenges in reinforcing its relevance and credibility by delivering
negotiated outcomes in the Doha Round and by strengthening its
architecture to better respond to changing economic realities
Towards an enabling MTS (2)
The possible future agenda of the MTS?
• Shifting focus of trade liberalization approaches in favour
of deeper liberalization, considering increasing trade
within GVCs?
– “Whole of supply chain” perspective that addresses the tradeinvestment-services-know-how nexus;
– Address tariff and non-tariff regulatory barriers
• Addressing the interface of trade with other public policy
spheres that emerged as a source of new trade frictions
– Relationship between trade and climate change and green growth
– Address high food and energy prices and related access concerns
– Trade and finance (exchange rates)
• Bearing in mind that tariff and industrial policies continue
to be used in developing countries to build productive
capacity, create employment and promote upgrading
within GVCs
27
Conclusion
• The expected broad-based contribution of trade to various
post-2015 sustainable development goals would require
policies supporting a positive interface between trade and
related public policies
• Evolving national policy needs and priorities would call for
an enabling environment assuring a fair and open trading
environment and reserving space for countries to
implement such policies, so that development dividends
can be equitably shared among countries and within an
economy
• In this context, it is necessary to reinvigorate the MTS as a
global public good with renewed impetus, credibility and
relevance;
• Coherence between multilateral and RTA should be
reinforced so that these arrangements can be turn into an
effective enabling environment for development
28
Thank You